I was in vacation all last week in the Crested Butte area of Colorado, a very beautiful area. On the flight back home last evening I was thinking about how the UK could make the most of Brexit.
One of the ways I came up with was for the UK to cut corporate taxes and truly embrace free trade. I wrote about that at 2:00 AM this morning in Stellar Opportunity for UK to Set Example for the World.
I was unaware that UK chancellor George Osborne had decided to do cut taxes.
It’s Noon and I just got up, surprised to see this headline: France Hits Out at UK Plan to Cut Corporate Tax.
France’s finance minister has warned that the UK’s plan to slash corporate taxes could hit Britain’s negotiations with the EU following the country’s vote to leave the bloc.
Michel Sapin said the initiative — which officials in both Paris and Berlin view as hostile — could affect Britain’s prospects of retaining the “European passport” that allows financial groups to sell their services and raise funds in the EU’s single market.
“I am not persuaded that this is a good thing for the UK,” the French minister said of Britain’s corporate tax plans at a press conference on Monday. “This will not change anything on the passport for instance. In fact, it’s not a good way to start a negotiation.”
Mr Sapin also criticised the “manners” of George Osborne, the UK chancellor who has promised to cut the corporate tax rate by five points to 15 per cent in an attempt to boost Britain’s attractiveness to business in the wake of last month’s referendum.
His comments echo remarks by Wolfgang Schäuble, Germany’s finance minister, who last week criticised the UK’s fiscal “race to the bottom”.
France and Germany are both concerned that the UK will be tempted to establish itself as a low-tax offshore jurisdiction in the EU’s outskirts in response to the Leave vote.
Michel Sapin Pisses and Moans
First Step in Training a Mule
There’s an old saying “The first step in training a mule is to hit it as hard as you can in the head with a stick.”
I don’t really advise that with mules, but it is the precise thing to do to EU nannycrats.
Reflections on Clearness
“It’s clear that the UK can’t participate in the big decisions involving the EU’s future,” said Emmanuel Macron, France’s economy minister.
Well, it’s equally clear the EU cannot participate in big decisions involving the UK’s future.
And with his plan to cut corporate taxes, chancellor Osborne just hit nannycrat mules in Germany, France, and Belgium in the head with not a stick, but a brick.
Trade War the Right Way
The UK should preemptively stick it to the EU by slashing its corporate tax rate to 10%, lower than any country in the EU.
| Country | Corporate Tax Rate % | Highest | Lowest |
|---|---|---|---|
| Austria | 25 | 55 | 25 |
| Belgium | 33 | 48 | 33 |
| Bulgaria | 10 | 40.2 | 10 |
| Croatia | 20 | 20.32 | 20 |
| Cyprus | 12.5 | 29 | 10 |
| Czech Republic | 19 | 45 | 19 |
| Denmark | 23.5 | 50 | 23.5 |
| Estonia | 20 | 26 | 20 |
| Finland | 20 | 61.8 | 20 |
| France | 33.3 | 50 | 33.3 |
| Germany | 29.65 | 56.8 | 29.4 |
| Greece | 29 | 49 | 20 |
| Hungary | 19 | 50 | 16 |
| Ireland | 12.5 | 50 | 12.5 |
| Italy | 31.4 | 53.2 | 31.4 |
| Latvia | 15 | 29 | 15 |
| Lithuania | 15 | 20 | 15 |
| Luxembourg | 29.22 | 40.29 | 28.6 |
| Malta | 35 | 35 | 35 |
| Netherlands | 25 | 48 | 25 |
| Poland | 19 | 40 | 19 |
| Portugal | 21 | 55.1 | 21 |
| Romania | 16 | 38 | 16 |
| Slovakia | 22 | 45 | 19 |
| Slovenia | 17 | 25 | 17 |
| Spain | 28 | 35 | 28 |
| Sweden | 22 | 60.1 | 22 |
| United Kingdom | 20 | 52 | 20 |
| Euro area Average | 24.6 | 36.8 | 24.3 |
| European Union Average | 22.8 | 35.2 | 22.8 |
The above table created from Trading Economics data.
Black Holes
France, Germany, and Belgium are hell bent on sticking it to the UK to make a point.
Recall that the Belgian Premier Warns EU Won’t Help UK Out of “Black Hole”
Ironically, If the UK does things correctly, it will be the EU that falls into the black hole.
Set Example for the World
Shed of inane EU rules and regulations coupled with the freedom to do anything it wants, the UK has a golden opportunity to embrace the benefits of genuine free trade and growth via low taxes.
I have often stated the first country that fully embraces free trade, regardless of what any other country does, will come out stunningly ahead.
The UK now has that chance.
Osborne Changes Tune
Osborne, whom I heavily criticized before Brexit because of his idiotic proposal to hike taxes (See Brexit Debate Focus Shifts to Chickens, Dead Cats, Taxes), has actually started the negotiation process quite well.
Getting France and Germany to piss and moan about “unfair” corporate tax rates in the UK is an excellent first step by Osborne.
Merkel Needs Another Smack to the Head
EU mules and nannycrats are very stubborn beasts.
Osborne should cut the rate not to 15% but to 10% to make the point clear that negotiations will not be as one-sided as her majesty, German chancellor Angela Merkel thinks.
As I have stated all along, the UK, not the EU has the upper hand in these negotiations.
For details, please see “No Cherry Picking” Says Merkel; Risk of Global Trade Collapse says Mish.
Mike “Mish” Shedlock
